Nevada-based Valley Electric Association (VEA) has started the voting process on a proposal to sell its 230-kV high voltage transmission System to GridLiance, an affiliate of Blackstone (NYSE:BX).
The VEA board of directors agreed this month to move forward with a proposal to sell VEA’s 230 kV transmission system to the Blackstone Energy Partners affiliate. An eventual sale still is contingent on a two-thirds vote of approval by member-owners in a special election, which will begin Sept. 14, and will run through mid-October.
VEA owns the facilities through its subsidiary Valley Electric Transmission Association, LLC. GridLiance plans to acquire the assets through a new transmission company it will form to operate in the Western Interconnection, GridLiance said in a Sept. 15 news release.
As of early Sept. 21, the “yes” votes were leading the “no” votes by 817 to 29. A total of 11,549 yes votes are needed for the sale to be approved, according to the VEA website. Member-owners can vote in person at designated locations, by mail, on the Internet or by proxy.
The cooperative has received offers for the 230-kV system that exceed $190m, nearly 2.4 times the investment cost, VEA said in a Sept. 16 news release.
The sale would return the largest cash distribution to members in the co-op’s history through a sale premium and the retirement of capital credits. If the sale is completed, each member-owner would receive an equal share of a $10m one-time cash premium ($579). In addition, $7.2m would be set aside for the retirement of capital credits immediately following the sale.
Further, the cooperative would roll back a 9.9% rate increase enacted in 2016; pay off debt, reduce operating costs, build equity, provide rate stability and new investment capital, and turn an operating expense into a revenue source, VEA said.
Debt now associated with the transmission system is $82m, VEA said in its news release.
VEA joined the California Independent System Operator (CAISO) in 2013, placing the HVTS in the California market and under CAISO’s regional tariff. In addition to optimizing the transmission system economically, joining CAISO created enhanced opportunities for renewable generation in VEA’s service territory.
In May of 2016, VEA issued a request for proposals to sell the HVTS, comprising approximately 160 miles of 230 kV transmission lines and related substation equipment.
Multiple companies submitted formal bids, and two finalists were further evaluated by the VEA Board before they selected GridLiance as the successful bidder.
GridLiance said it will pay net book value for the assets, assume outstanding debt, and provide additional value that brings the total consideration to over $200m.
VEA and GridLiance are currently working together on an exclusive basis to finalize the definitive agreements, which are expected to be signed within the next few weeks.
Although VEA would no longer own the system, the new owner would be subject to regulatory approvals set forth by the Federal Energy Regulatory Commission (FERC). FERC exists to protect rate payers from dramatic rate adjustments, VEA told its members.
VEA said no job cuts are expected because of the sale. “We predict we will actually add employees because the new owner has expressed the desire to expand the system further to promote local renewables,” VEA said.
Valley Electric Association’s 230 kV transmission system is made up of the lines on the 100-foot red steel towers running north and south out of Pahrump. The lines connect VEA to the regional transmission grid. There are approximately 164 miles of 230 kV lines in Nye and Clark counties. VEA is a member-owned nonprofit electric utility headquartered in Pahrump, Nevada. While VEA started as a small rural electric utility in 1965, the company now provides electric service to more than 45,000 people within a 6,800-square-mile service area located primarily along the California-Nevada border, with the majority in Nevada.
Incorporated in 2014, GridLiance’s core business model is to partner with municipalities, public power agencies and electric cooperatives to increase system reliability and lower costs.